Analysis And Treatment Suggestions For Unpaid Appropriation Of Funds

(1) analysis of phenomena and causes.

The free use of funds is the act of not paying interest and using funds.

This phenomenon also exists in affiliated enterprises or related enterprises.

The main performance is that an enterprise occupies the funds of another enterprise without compensation. The two sides do not pay or collect interest. It is like "Zhou Yu is willing to fight for a war."

This phenomenon is more common in the companies with "mother child" relationship in China.

(2) behavior and policy analysis.

Interest is payable on the use of funds.

This is just like "debt repayment".

Therefore, in business practice, borrowing funds without paying interest or no interest is a tenable reason.

According to the Circular of the State Administration of Taxation on the handling of enterprise income tax on the payment of services between parent and subsidiary companies (2008) 86, the State Administration of Taxation stipulates:

1. The parent company provides various kinds of subsidiary companies (hereinafter referred to as subsidiaries).

The expenses incurred should be determined according to the principle of fair trade between independent enterprises, and be treated as the normal labor cost of enterprises.

If the parent company fails to collect the price according to the business pactions between the independent enterprises, the tax authorities shall have the right to adjust them.

Two, the parent company provides various services to its subsidiaries, the two sides should sign a service contract or agreement, stipulate clearly the contents of providing services, the standard and amount of fees, etc., where the service fee incurred by the parent company according to the above contract or agreement, the parent company shall declare and pay the tax as the business income, and the subsidiary shall be deducted as the cost before the tax.

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As a kind of financing service, the parent company must collect interest from independent enterprises, invoke and pay taxes according to law (business tax and enterprise income tax), and the eligible interest expense of subsidiary companies can be regarded as the forefront of taxation at cost and expense.

Although the tax law does not specifically stipulate the need to pay interest on financing loans between other affiliated enterprises, it should be carried out in accordance with the document No. 86 of the state tax [2008].

(3) processing recommendations.

In view of the phenomenon of gratuitous occupation of funds between affiliated enterprises, we propose the following:

1) we should adjust the behavior of unpaid occupation of funds according to the tax law and guard against being punished.

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However, how much interest can be charged can be stipulated by both parties.

But remember that the general spirit of the tax law is that income must be taxed, and the expenditure is eligible to allow deductions.

2) if a subsidiary takes up the funds of the parent company without compensation, the parent company may replace the funds that the subsidiary has occupied without compensation for investment.

This does not involve interest payments.

If the corporate income tax rates of both parties are equal, they will not increase the tax burden of corporate income tax as a whole.

3) if there is a buying and selling relationship between the two parties, the funds that can be freely occupied can be changed into buying and selling contracts through the purchase and sale contracts.

Whether the interest is added to the sum can be determined by the two parties in the contract independently. There is no rigid provision in the tax law.

Or on credit sale, the party who needs the money does not pay the loan, and both sides do the bill processing, so that the capital demand side can also get a "interest free" loan.